2. "Once a full record is developed, both the circuit court and this Court
will review the findings and conclusions of the Tax Commissioner under a clearly erroneous
and abuse of discretion standard unless the incorrect legal standard was applied." Syllabus
point 5, Frymier-Halloran v. Paige, 193 W. Va. 687, 458 S.E.2d 780 (1995).

5. The Federal National Mortgage Association is not an instrumentality
of the United States as contemplated by W. Va. Code 11-13-2k (1983) (Repl. Vol. 1983)
(Repealed 1989). Consequently, all interest received by a bank on securities of the Federal
National Mortgage Association, except interest derived from mortgage-backed securities, is
taxable as gross income to the bank pursuant to this section of the code.

6. A bank's Business and Occupation tax bad debt deduction is limited to
the accrued interest on such debt for which Business and Occupation tax has been paid.

Davis, Justice:

Shawnee Bank, Inc., successor by merger to 2nd Avenue Bank of South
Charleston, appeals an order of the Circuit Court of Kanawha County, which affirmed a
decision of the Commissioner of the State of West Virginia Department of Tax and Revenue.
Shawnee Bank contends that the circuit court erred in finding that the decision of the Tax
Commissioner was not plainly wrong to the extent that such decision found that, for purposes
of the state Business and Occupation tax, (1) interest received by a bank on certain securities
of the Federal National Mortgage Association is taxable as gross income to the bank, and (2)
a bank's bad debt deduction is limited to the accrued interest on such debt for which Business
and Occupation tax has been paid. We find that the circuit court correctly ruled that the
decision of the Department of Tax and Revenue was not plainly wrong.

I.

FACTUAL AND PROCEDURAL HISTORY

On June 8, 1988, the State Tax Department of West Virginia [hereinafter Tax
Department] issued an assessment for Business and Occupation tax [hereinafter B & O tax](1)
against 2nd Avenue Bank of South Charleston [hereinafter the bank](2) for the period of
January 1, 1982, through June 30, 1987, for a tax liability of $4,231.11, plus interest of
$1,265.50. The tax liability resulted from the auditor's disallowance of certain exclusions
and deductions from gross income that were claimed by the bank. Specifically, the auditor
disallowed the bank's exclusion of interest earned from investments in securities issued by
the Federal National Mortgage Association [hereinafter FNMA]. The auditor also
disallowed the bank's deduction of the principal of bad debt reserves.

The bank responded to the assessment by filing a petition for reassessment with
the Tax Department. After a hearing on the petition, the Tax Commissioner(3) rendered an
administrative decision affirming the assessment. The bank then appealed to the Circuit
Court of Kanawha County where, by order entered May 1, 1996, the court affirmed the
decision of the Tax Commissioner. It is from this final order of the circuit court that the
bank now appeals.

II.

STANDARD OF REVIEW

In this case we are asked to review certain statutory and regulatory provisions
of the West Virginia B & O tax to determine whether the Tax Commissioner correctly
interpreted such provisions. We have previously held that "[i]nterpreting a statute or an
administrative rule or regulation presents a purely legal question subject to de novo review."
Syl. pt. 1, Appalachian Power Co. v. State Tax Dep't of West Virginia, 195 W. Va. 573, 466
S.E.2d 424 (1995). Furthermore, "[o]nce a full record is developed, both the circuit court
and this Court will review the findings and conclusions of the Tax Commissioner under a
clearly erroneous and abuse of discretion standard unless the incorrect legal standard was
applied." Syl. pt. 5, Frymier-Halloran v. Paige, 193 W. Va. 687, 458 S.E.2d 780 (1995).
In making our determination, we are mindful that "[i]nterpretations of statutes by bodies
charged with their administration are given great weight unless clearly erroneous." Syl. pt.
4, Security Nat'l Bank & Trust Co. v. First W. Va. Bancorp., Inc., 166 W. Va. 775, 277
S.E.2d 613 (1981).

III.

DISCUSSION

A.

Appropriateness of Exclusion of Interest Income Received from

Federal National Mortgage Association

We are first asked to interpret the language of W. Va. Code 11-13-2k (1983)
(Repl. Vol. 1983) (Repealed 1989),(4) to determine whether, for the purpose of calculating a
bank's B & O tax liability, interest income received from the Federal National Mortgage
Association [hereinafter FNMA] is excludable from gross income as "interest received on
the obligations of the United States, its agencies and instrumentalities." The relevant portion
of W. Va. Code 11-13-2k states:

Upon every person engaging or continuing within this
State in the business of banking or financial business, from and
after the first day of April, one thousand nine hundred seventy-one, the tax shall be equal to one and fifteen one-hundredths
percent of the gross income received from interest, premiums,
discounts, dividends, service fees or charges, commissions,
fines, rents from real or tangible personal property, however
denominated, royalties, charges for bookkeeping or data
processing, receipts from check sales, charges or fees, and
receipts from the sale of tangible personal property: Provided,
that gross income shall not include (a) interest received on the
obligations of the United States, its agencies and
instrumentalities. . . .

(Emphasis added).

The bank argues that the FNMA is an agency or instrumentality of the United
States as contemplated by W. Va. Code 11-13-2k (1983) (Repl. Vol. 1983) (Repealed
1989). Thus, interest income earned by the bank on FNMA investments may be excluded
from the bank's gross income when calculating its B & O tax liability. Finally, the bank
contends that even if a state may assess a tax on the interest income earned on FNMA
investments without violating the intergovernmental tax immunity doctrine,(5) such tax is
prohibited by W. Va. Code 11-13-2k.

The Tax Commissioner responds that Rockford Life Insurance Company v.
Illinois Department of Revenue, 482 U.S. 182, 107 S. Ct. 2312, 96 L. Ed. 2d 152 (1987), is
instructive to the determination of this issue. In Rockford, the United States Supreme Court
held that inclusion in a tax base of the value of mortgage-backed securities guaranteed by
the Government National Mortgage Association [hereinafter GNMA] did not violate a
federal tax immunity statute(6) or the doctrine of intergovernmental tax immunity. In reaching
this conclusion, the Supreme Court explained that GNMA securities are not "a binding
promise by the United States to pay specified sums at specified dates." Id. at 189-90, 107
S. Ct. at 2316-17, 96 L. Ed. 2d at 160. The Tax Commissioner interprets this comment to
mean that the GNMA is not an instrumentality of the United States, and furthermore, because
of the similarity between the FNMA and the GNMA, the FNMA likewise is not an
instrumentality of the United States. In support of this argument, the Tax Commissioner
cites Yurista v. Commissioner of Revenue, 460 N.W.2d 24 (Minn. 1990), in which the
Supreme Court of Minnesota held that interest income from securities issued by the FNMA
are not exempt from Minnesota's state income tax. The Yurista court addressed a statute that
exempted from state income tax "interest income on obligations of any authority,
commission, or instrumentality of the United States to the extent includable in taxable
income for federal income tax purposes but exempt from state income tax under the laws of
the United States." Id. at 27 (emphasis added).

We believe the authorities cited by the Tax Commissioner establish that a state
may tax interest income from securities issued by the FNMA without violating the
intergovernmental tax immunity doctrine. However, this does not resolve the question of
whether such income is in fact subject to taxation under West Virginia law. To answer that
question we must determine whether the FNMA is an agency or instrumentality of the United
States as contemplated by W. Va. Code 11-13-2k (1983) (Repl. Vol. 1983) (Repealed
1989).

Prior to 1968, the FNMA was a government agency within the Department of
Housing and Urban Development. 12 U.S.C. 1717(a)(1) (1992) (1994 Ed.). However, on
September 1, 1968, the FNMA was partitioned into two separate and distinct corporations,
the FNMA and the GNMA. 12 U.S.C. 717(a)(2) (1992) (1994 Ed.). The post-partition
FNMA became a "[g]overnment-sponsored private corporation,"(7) while the GNMA remained
a part of the federal government. 12 U.S.C. 1716b (1968) (1994 Ed.).

Several courts have addressed the question of whether the post-partition FNMA
is a government agency or instrumentality. These courts have reached different results in
different contexts. As the bank noted in its brief, the United States Court of Appeals for the
Ninth Circuit examined this issue in answering the question of whether the City of Los
Angeles violated the Supremacy Clause by foreclosing on property in which the FNMA had
an interest. Rust v. Johnson, 597 F.2d 174 (9th Cir. 1979). To determine whether the city
had exercised its power over property of the United States, the court had to determine
whether the FNMA was a federal instrumentality. Id. at 177. The Rust court opined that the
partitioning of the FNMA resulted from the "Congressional intent to reduce the impact of
[the] FNMA's operations on the budget of the United States." Id. (citations omitted). In
addition, the court observed that the status of the post-partition FNMA was analogous to the
federal land banks and federal home loan banks, which, the court remarked, "are treated as
federal instrumentalities engaged in the performance of governmental functions." Id. at 178.
Finally, the Rust court expressed that it was "unable to find anything in the legislative history
or in the statutes governing the operation of FNMA which supports the conclusion that
Congress intended to strip FNMA of its status as a federal instrumentality." Id.

Similarly, the United States District Court for the Southern District of New
York, also addressing a Supremacy Clause claim, determined that the FNMA was an
instrumentality of the United States. Federal Nat'l Mortgage Ass'n v. Lefkowitz,
390 F. Supp. 1364 (S.D.N.Y. 1975).(8) In reaching this conclusion, the Lefkowitz court
considered the extent of the regulatory power over the post-partition FNMA that was
retained by the Secretary of Housing and Urban Development and the Secretary of the
Treasury. Id. at 1368. The court further considered the fact that Congress does not require
the FNMA to qualify to do business in any state and provided it with immunity from most
forms of state taxation. Id.(9)

Conversely, the United States Court of Appeals for the Sixth Circuit,
addressing, in part, the issue of whether the FNMA is an instrumentality of the federal
government such that its foreclosure of a mortgage by advertisement constituted state action
that was subject to the due process requirements of the Fifth Amendment to the United States
Constitution, concluded that the FNMA was not an instrumentality of the United States.
Northrip v. Federal Nat'l Mortgage Ass'n., 527 F.2d 23 (6th Cir. 1975). In its discussion of
this issue, the Northrip court explained that President Johnson believed that "the secondary
[mortgage] market operations were more appropriately placed in the private sector." Id. at
30 (citing President's Message, Houses and Cities. H.R. Doc. No. 261, 90th Cong., 2nd
Sess. (1968)). Consequently, the President proposed legislation to privatize the FNMA,
which Congress then passed. Id.

Continuing its analysis, the Northrip court acknowledged the broad regulatory
powers over the FNMA granted to the Secretary of Housing and Urban Development and the
additional limited control granted to the Secretary of the Treasury. Id. at 30-31. The court
also recognized that the government had retained some involvement in the workings of the
FNMA in the form of appointing a portion of the board of directors. Id. at 31-32. However,
the court also observed that the profits of the private FNMA corporation were "taxed at the
regular corporate rates," and employees hired after 1968 were "employees of the corporation
and [were] not subject to the civil service laws." Id. at 30-31 (citing 12 U.S.C.
1723a(d)(1)). Finally, in reaching its conclusion that actions of the FNMA were not state
actions, the court commented:

The statutes regulating FNMA imposed on it certain obligations
but there is no indication that FNMA's activities necessarily
should be considered powers traditionally associated with
sovereignty, such as eminent domain.

It was the congressional intent to disassociate FNMA
from its previous government ownership because it was not
appropriate for the government to be involved in the operation
of a secondary mortgage market.

The Northrip rationale was subsequently followed by the United States Court
of Appeals for the Fifth Circuit. Roberts v. Cameron-Brown Co., 556 F.2d 356 (5th Cir.
1977). In Roberts, the court addressed a due process issue related to the FNMA's nonjudicial
foreclosure of a mortgage. The court cited Northrip, and stated: "[w]e stand with the Sixth
Circuit position that although the regulating statutes impose certain obligations on FNMA,
the federal government and FNMA have not become so interdependent as to make its actions
the actions of the federal government." Id. at 359.

The Supreme Court of Missouri has also found the Northrip rationale
persuasive. In Federal National Mortgage Association v. Scott, 548 S.W.2d 545 (Mo. 1977),
the court was asked to determine whether the FNMA's foreclosure on a deed of trust was
federal action subject to the due process clause of the Fifth Amendment. The court adopted
the reasoning of the Sixth Circuit as expressed in Northrip and held that the FNMA was not
a federal instrumentality and that its action was the action of a private individual. Id. at 549.

It has also been determined that the FNMA is not a federal agency in a context
other than due process. In Werts v. FederalNational Mortgage Association, 48 B.R. 980
(E.D. Pa. 1985), a bankruptcy action appealed to the United States District Court for the
Eastern District of Pennsylvania, the court determined that the FNMA was not an agency of
the United States. The plaintiff-debtor in Werts complained, in part, that the FNMA failed
to comply with the disclosure requirements of the Truth in Lending Act, and consequently,
the debtor was entitled to certain statutory remedies. The FNMA argued in defense that it
was not subject to civil or criminal penalties for violating the Truth in Lending Act pursuant
to 15 U.S.C. 1612(b)(11) because it was an agency of the United States. The district court
cited, with approval, Northrip v. FNMA and concluded that the FNMA was not an agency
of the United States. Werts at 983.

Based upon the foregoing, it is apparent that the FNMA is a hybrid
organization that is considered an instrumentality of the United States under some
circumstances, such as those implicating the Supremacy Clause, while in other contexts, such
as due process, it is considered a non-governmental private entity. We have previously held
that "'"[w]here a person claims an exemption from a law imposing a license or tax, such law
is strictly construed against the person claiming the exemption." Syl. pt. 2, State ex rel.
Lambert v. Carman, State Tax Commissioner, 145 W. Va. 635, 116 S.E.2d 265 (1960).' Syl.
pt. 5, Pennsylvania & West Virginia Supply Corp. v. Rose, 179 W. Va. 317, 368 S.E.2d 101
(1988)." Syl. pt. 2, Tony P. Sellitti Constr. Co. v. Caryl, 185 W. Va. 584, 408 S.E.2d 336
(1991). Because the FNMA is not an instrumentality of the United States in the strict sense
of the term, and because we must construe W. Va. Code 11-13-2k strictly against the bank,
we hold that the FNMA is not an instrumentality of the United States as contemplated by that
statute. Consequently, we hold further that all interest received by a bank on securities of
the FNMA, except interest derived from mortgage-backed securities,(12) is taxable as gross
income to the bank pursuant to W. Va. Code 11-13-2k (1983) (Repl. Vol. 1983) (Repealed
1989).

B.

Bad Debt Deduction

We next are asked to determine the extent to which a bank's bad debts may be
deducted from gross income. The Tax Commissioner concluded that a bank's bad debt
deduction is limited to the accrued interest on such debt for which business and occupation
tax has been paid. Nevertheless, the bank argues that it properly deducted its net business
bad debts in calculating its taxable income for B & O tax purposes.(13) The bank argues that
its deductions conformed with the language of the 1964 B & O tax regualtions, which stated
in relevant part:

Those reporting on an accrual basis may, except as hereinafter
provided, deduct bad debts from gross receipts for the year in
which the debts are ascertained to be worthless and are charged
off. The amount to be deducted is net bad debts. Net bad debts
are charge offs minus recoveries.

W. Va. Leg. Reg. (BOT) 11-13, Series I, 4.02(a), page 13 (1964).

The bank submits that, although the Tax Commissioner argues that this
regulation was repealed in 1974, the commissioner provides no statutory or regulatory
support for that contention. Moreover, the bank argues that even if the 1964 regulation does
not apply to the present case, the definition of "gross income" found in W. Va. Code 11-13-2k (1983) (Repl. Vol. 1983) (Repealed 1989) supports the bank's argument that it is
entitled to the deduction as claimed.

By contrast, the Tax Commissioner responds that neither W. Va. Code 11-13-2k nor the applicable legislative regulations provide for the deduction of bad debt
principal as claimed by the bank. The Tax Commissioner argues that the 1964 version of
the regulations was superseded by replacement regulations in 1974. The Tax Commissioner
further argues that the 1974 replacement regulations do not contain the provision relied on
by the bank. In addition, the Tax Commissioner submits that "'[t]he Legislature must be
presumed to know the language employed in former acts, and, if in a subsequent statute on
the same subject it uses different language in the same connection, the court must presume
that a change in the law was intended.' Syl. pt. 2, Hall v. Baylous, 109 W. Va. 1, 153 S.E.
293 (1930)." Syl. pt. 2, Butler v. Rutledge, 174 W. Va. 752, 329 S.E.2d 118 (1985).

We need not resort to the rules of interpretation to determine whether the 1964
regulations are applicable to the case sub judice. The foreword to the 1974 B & O Tax
Regulations states: "[t]he business and occupation tax rules and regulations contained herein
supersede those business and occupation tax regulations that were promulgated by the Tax
Department in 1964." W. Va. B & O Tax Reg. (CCH) 76-501, foreword (1974).(14)
Because the provision relied upon by the bank was omitted from the 1974 B & O Tax
Regulations, we find that the bank's reliance on that particular provision was misplaced.
Consequently, we look to the statutes and regulations in effect during the relevant period,
1982 to 1987, to determine if and to what extent a bank's bad debts may be deducted from
its gross income.

A bank's B & O tax liability is calculated as a percentage of the bank's "gross
income." W. Va. Code 11-13-2k (1983) (Repl. Vol. 1983) (Repealed 1989). In the
absence of an express B & O tax bad debt deduction, we believe that such a deduction may
be claimed only to the extent that moneys received were initially reported and taxed as gross
income but were later determined not to be gross income. Cf. Soriano v. Soriano, 184
W. Va. 302, 307, 400 S.E.2d 546, 551 (1990) (observing that "the United States Supreme
Court has stated: 'The propriety of a deduction does not turn upon general equitable
considerations, such as a demonstration of effective economic and practical equivalence.
Rather, it "depends upon legislative grace; and only as there is clear provision therefor can
any particular deduction be allowed."' Commissioner v. National Alfalfa Dehydrating &
Milling Co., 417 U.S. 134, 148-49, 94 S. Ct. 2129, 2137, 40 L. Ed. 2d 717, 727 (1974)
(quoting New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440, 54 S. Ct. 788, 790, 78 L. Ed.
1348, 1352 (1934))"); Christopher v. James, 122 W. Va. 665, 667, 12 S.E.2d 813, 814
(1940) (recognizing, in income tax context, general rule that "'[e]very deduction from gross
income is allowed as a matter of legislative grace, and "only as there is a clear provision
therefor can any particular deduction be allowed. . . ."' White v. United States, 305 U.S. 281,
292, 59 S. Ct. 179, 184, 83 L. Ed. 172, [179 (1938)]"), overruled in part, In re Kanawha
Valley Bank, 144 W. Va. 346, 109 S.E.2d 649 (1959). Thus, we must examine the meaning
of gross income as contemplated for B & O tax purposes:

The term "gross income" of a banking or financial business
shall mean interest, premiums, discounts, dividends, service fees
or charges, commissions, fines, rents from real or tangible
personal property, royalties, charges for bookkeeping or data
processing, receipts from check sales, charges or fees, and
receipts from the sale of tangible personal property.

W. Va. Leg. Reg. (BOT) 11-10, Series XIII, 2k.02, page 155 (1974). See also W. Va.
Code 11-13-2k (1983) (Repl. Vol. 1983) (Repealed 1989). "In the interpretation of
statutory provisions the familiar maxim expressio unius est exclusio alterius, the express
mention of one thing implies the exclusion of another, applies." Syl. pt. 3, Manchin v.
Dunfee, 174 W. Va. 532, 327 S.E.2d 710 (1984). Applying this maxim, we conclude that
the legislature did not intend to include the return of the principal of a loan in the calculation
of gross income. We therefore hold that a bank's B & O Tax bad debt deduction is limited
to the accrued interest on such debt for which business and occupation tax has been paid.
Consequently, we find that the Tax Commissioner did not abuse his discretion. Therefore,
his conclusion was not clearly erroneous.

IV.

CONCLUSION

For the foregoing reasons, we conclude that the circuit court did not err in
upholding the decision of the Tax Commissioner as not plainly wrong to the extent that the
commissioner found, for purposes of the State B & O tax, that (1) the FNMA was not an
instrumentality of the United States as contemplated by W. Va. Code 11-13-2k (1983)
(Repl. Vol. 1983) (Repealed 1989), and thus, interest received by a bank on certain securities
of the FNMA was taxable as gross income to the bank, and (2) a bank's bad debt deduction
is limited to the accrued interest on such debt for which business and occupation tax has
already been paid. Consequently, the May 1, 1996, order of the Circuit Court of Kanawha
County is affirmed.

Affirmed.

1. "The West Virginia business and occupation tax is a tax on the privilege of
doing business in West Virginia; it is not an income tax." H.O. Anderson, Inc. v. Rose, 177
W. Va. 419, 425, 352 S.E.2d 541, 547 (1986) (citing Syl. pt. 3, Bethlehem Mines Corp. v.
Haden, 153 W. Va. 721, 172 S.E.2d 126 (1969). Banks became subject to the West Virginia
B & O tax in 1971 with the adoption of W. Va. Code 11-13-2k. Acts of the Legislature,
Regular Session, ch. 169. However, this section of the West Virginia Code was rendered
inoperative as of July 1, 1987, by W. Va. Code 11-13-28 (1987) (Repl. Vol. 1995), and
was subsequently repealed. 1989 Acts of the Legislature, First Extraordinary Session, ch.
2.

2. The appellant, Shawnee Bank, Inc., became successor by merger to 2nd
Avenue Bank of South Charleston. Thus, the term "the bank" will hereinafter be used to
refer to either 2nd Avenue Bank of South Charleston or Shawnee Bank.

3. During the proceedings before the circuit court, James H. Paige, III, was the
Secretary of the Department of Tax and Revenue of the State of West Virginia/Tax
Commissioner. On February 11, 1997, Robin C. Capehart succeeded James Paige in this
office. Accordingly, Commissioner Capehart, not former Commissioner Paige, responded
to this appeal.

4. While the 1983 version of W. Va. Code 11-13-2k was not in effect during
the first year covered by the assessment in question, the 1983 amendment made no change
to the language we are now asked to interpret.

[the intergovernmental tax immunity doctrine] is based on the
proposition that the borrowing power is an essential aspect of
the Federal Government's authority and, just as the Supremacy
Clause bars the States from directly taxing federal property, it
also bars the States from taxing federal obligations in a manner
which has an adverse effect on the United States' borrowing
ability.

7. The purpose of the FNMA is to operate a secondary market for home
mortgages. 12 U.S.C. 1716b (1968) (1994 Ed.).

8. Although the Lefkowitz court found that the FNMA was a federal
instrumentality, it concluded that the burden created by the New York state requirement that
the FNMA pay interest on tax and insurance escrow accounts was collateral and minimal and
did not violate the Supremacy Clause. Federal Nat'l Mortgage Ass'n v. Lefkowitz, 390
F. Supp. 1364 (S.D.N.Y. 1975).

9. For another case implying that the FNMA is a federal instrumentality, see
Kidder Peabody & Co., Inc. v. Unigestion Int'l, Ltd., 903 F. Supp. 479 (S.D.N.Y. 1995)
(finding, in part, that FNMA securities were government securities and, as such, they were
exempt from federal Securities Act registration requirements).

10. Although the Northrip court recognized the contrary result reached in Federal
Nat'l Mortgage Ass'n v. Lefkowitz, 390 F. Supp. 1364 (S.D.N.Y 1975), it commented that the
Lefkowitz court "discussed neither state action cases nor cases construing the Supremacy
Clause as they related to federally organized corporations." Northrip v. Federal National
Mortgage Assoc., 527 F.2d 23, 32 n.7 (6th Cir. 1975). The Northrip court concluded that
Lefkowitz was not persuasive in resolving a case involving state action under the Fifth or
Fourteenth Amendments to the United States Constitution. Id.

12. Our holding makes an exception for interest derived from mortgage-backed
securities to conform with the provision of W. Va. Code 11-13-2k (1983) (Repl. Vol.
1983) (Repealed 1989) that states "gross income shall not include . . . (c) interest received
on investments or loans primarily secured by first mortgages or deeds of trust on residential
property occupied by nontransients . . . ."

13. The bank asserts that it took the deduction in the year the loans were
ascertained to be worthless in an amount sufficient to offset the previously reported and
taxed income, but not exceeding the principal loaned.